PTC India Seeks Coal Supply to Spur Power Trading

By Archana Chaudhary

Aug. 25 (Bloomberg) -- PTC India Ltd. plans to start importing coal to supply power stations in return for electricity to defend its position as the nation's biggest energy trader.

PTC has agreed to supply 1.5 million metric tons of coal by December 2009, Chairman T.N. Thakur said in an interview in New Delhi. The company plans to invest in mines in Indonesia and India to secure as much as 15 million tons, equivalent to three- quarters of India's annual imports, he said.

The energy trader faces competition from new power exchanges and is using part of the 12 billion rupees ($275 million) it raised in a January share sale to invest in power projects and assets. PTC will pay generators to use its coal and sell the power produced to its customers, Thakur said.

``Coal is going to be king in the next few years and those who own the resource will grow,'' Prasad Dahapute, a Mumbai-based analyst with Antique Stock Broking Ltd., said today. PTC ``will make more money through generation than it can through trading.'' He recommends investors buy the company's shares.

PTC shares fell 1.3 percent to 79.1 rupees at the close in Mumbai trading after gaining as much as 2.4 percent. The shares have fallen 53 percent so far this year. India's benchmark stock index rose 0.3 percent today.

Demand for coal, which fires more than half of India's generation capacity of 141,000 megawatts, is rising as the country grows at the second-fastest pace among major economies. PTC has signed an agreement with a Singapore-based company to buy a stake in mines in Indonesia, the world's biggest exporter of power-station coal, Thakur said, without giving details.

`Expedite Generation'

``The idea behind developing this business model was to expedite generation and for this, you can't depend on Indian coal alone,'' Thakur said.

India may import about 20 million tons of coal in the year through March, according to the Central Electricity Authority, a statutory body that advises the government on power policy and sets technology standards for the industry. Imports may double by 2012, Anil Razdan, the most senior bureaucrat in the Power Ministry said May 21.

State and private utilities in India plan to almost double the country's generation capacity to 250,000 megawatts by 2017. New power exchanges are expected to help reduce shortages by conducting spot trades in electricity, which is usually sold through contracts, allowing captive plants run by companies to sell surplus power.

PTC owns 26 percent of Indian Energy Exchange, the country's first, which started on June 27. Financial Technologies (India) Ltd. is the exchange's founder and majority owner of the world's third-biggest gold bourse. The National Commodity & Derivatives Exchange said in June it won approval to set up a competing platform.

Capacity Addition

NTPC Ltd., India's biggest generator, and Power Finance Corp., which both partly own PTC, plan to set up the country's third electricity exchange.

Power generators haven't kept pace with rising demand from homes, factories, shopping malls and cinemas. India's peak electricity shortage may widen to 18.1 percent in the year to March 31, when it plans to add 10,178 megawatts of capacity, according to the Central Electricity Authority. The government targets adding 78,700 megawatts by March 2012.

Bulk of the capacity addition will come from nine coal-fired plants, each capable of generating 4,000 megawatts. These so- called ultra mega projects are planned near coal mines or along the coast to enable them to use imported fuel.

Tata Power Ltd., India's biggest electricity generator outside state control, is setting up one of the projects at Mundra in western India and has invested $1.2 billion in two Indonesian mines to secure coal supplies.

Prices at Australia's Newcastle port, the world's biggest exporter of thermal coal, reached a record $194.79 a ton in the week ended July 4. Prices have since declined to $162.15 a ton in the week ended Aug. 22, according to the globalCOAL NEWC Index.

To contact the reporter on this story: Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net.